Legal Resources for Worker Cooperatives
The Sustainable Economies Law Center (SELC) periodically produces reference materials for worker cooperatives. One comprehensive resource is their California Worker Cooperative Law Practice Guide. While written primarily for lawyers entering this field of practice, the guide has a wealth of information for those looking to organize or convert to a worker cooperative as well as those providing professional and technical assistance cooperatives. PathLight Law Managing Partners Sarah Kaplan and Kim Arnone contribute two chapters to this online publication focusing on entity structures and capital raising strategies.
Chapter Three: Entity Choice
This chapter examines the options and decision-making process for choosing a legal entity for a worker cooperative or a multi-stakeholder cooperative with a worker-member class.
- A worker cooperative is any business that is democratically owned and controlled by its workers and that primarily shares profits on the basis of patronage rather than equity ownership. Confusion about entity choice can arise because people sometimes think that a “cooperative” is one specific legal entity.
- There is a cooperative corporation, but not all cooperatives are organized legally as cooperative corporations.
- A worker-owned business could be organized as any of several different legal entities.
Which entity is right for a particular business depends on a variety of factors, which are covered in the full chapter.
Chapter Seven: Securities/Capital Raising
This chapter discusses how cooperatives can obtain capital directly from individuals to fund start-up operations or growth.
Cooperatives, like all organizations, need capital to fund start-up operations or growth. Investments from individuals (or mission-aligned enterprises like foundations) are often the first few layers in the “capital stack.”
Cooperatives often seek loans from institutional lenders such as credit unions, community development financial institutions (CDFIs), or banks after receiving some start-up funding from individual investments. Cooperatives can employ a variety of strategies to raise capital broadly and, in some cases, publicly from their members and community of supporters.
Each strategy has benefits and challenges depending on the amount of capital to be raised, types of potential investors (accredited or nonaccredited), and where potential investors are located, among other factors. This chapter outlines many of the available strategies.